Interest Rates (Photo credit: 401K)
Term deposits are an extremely popular investment, particularly given the current economic client. For a start, they’re straightforward – you put your money in the bank, you get money back – but there are still a number of things to think about if you’re to make the right investment. When it comes to finding the best term deposit to suit you, never underestimate the importance of shopping around.
Be aware that many of the banks offer great rates to start with. That rate drops, however, after six months and you’re left with a fairly ho-hum investment in relation to competitive choice. If you ask the question before you invest, you’ll avoid any nasty surprises.
On the whole, the most popular term deposits are those with three and six-month terms. Some of the smaller financial institutions offer great deals, but term deposit rates are on the downward slide, so you might prefer a longer term deposit – for example, one or three-year terms. As long as you’re prepared to lock your money away for longer, it’s a smart way to take advantage of higher rates. The flipside of this is that interest rates can change quickly and without notice. Even if you lock in a good rate for 12 months or more, there is a risk that short-term interest rates could start to rise again in the meantime. Spreading your cash over varying term-deposit time frames can be one way to ensure you don’t lose out.
If you already hold a term deposit, start shopping around for a new one before the term runs out. When your term deposit is about to mature, call your provider and find out what the new interest rate will be. If you’re not happy, switch your term deposit to a term that pays a competitive interest rate. If you don’t call before your term-deposit matures, it’s highly possible you’ll be charged a fee to get out of it.
It’s important to make sure you find a bank or financial institute with the best rate. We recommend researching for the best rate available, with little to no fees and signing up with them. Make sure they offer your ideal length for a term deposit account.
Finally, check out which banks offer partial withdrawal fixed term deposits; it’s simply a term deposit which gives you the fixed interest rate benefits of a 12 month term, but gives you the possibility of accessing up to 20% of your funds if you need it during the term. This feature combines the benefit of making your money work for you in a term deposit and having 20% on stand-by as an accessible emergency fund.
You are correct, It is a good idea to take advantage of the best interest rates whenever possible. The problem is that they are so low right now it is difficult to get excited about a 1.5% interest rate as opposed to a 1.0%. If you are making a very large deposit it could make a bit of a difference though.
Having worked in banking I think its just fairly common that you get the good rates as the initial term. Usually this is just for 6-12months. In a lot of cases you only get those if you are new to the bank or are bringing money over that is not in your current bank account. I am with Zimmy take advantage whenever possible. I just don’t like changing banks every six months chasing rates.